AllBestEssays.com - All Best Essays, Term Papers and Book Report
Search

The Three Myths in the Chinese Economy

Essay by   •  August 27, 2019  •  Study Guide  •  1,181 Words (5 Pages)  •  29 Views

Essay Preview: The Three Myths in the Chinese Economy

Report this essay
Page 1 of 5

The three myths

The first is inflationary pressure, the second is liquidity pressure, and the third is growth downward pressure. Further analysis of these three myths, in fact, are subject to a spindle of the three representations. And the main axis is not inside, but outside, which is the problem derived from the depreciation of the dollar.

macroeconomic

macroeconomic

Before we break down the three myths, one important premise is the movement of the dollar. Since this is the crux of the matter and a prerequisite for getting rid of the "big three" myths, it is important to understand where the dollar is headed first.

To analyze the direction of the dollar, we have to talk about the weak dollar strategy pursued by the United States. The dollar has been falling for several years, causing chaos in the global price system. That is to say, from the point of view of the United States, has achieved the expected goal, continue to play, will cause substantial damage to the United States itself.

First, the continued decline of the dollar has created difficulties for economic rivals. For example, the renminbi has appreciated by nearly 20% against the dollar in three years, causing most of China's low-margin export-oriented enterprises to suffer from the double squeeze of exchange rate and cost, leading to losses or even bankruptcy. In other words, the dollar's decline has served its purpose of squeezing rivals.

Second, the chaos in the global price system caused by the continuous depreciation of the us dollar and the increasing inflationary pressure have reached a critical moment that cannot be cured. In the interests of the United States, it would do substantial harm to the American economy itself if it were allowed to grow. At this point, if the dollar from weak to strong, can stabilize price expectations, conducive to the next development of the U.S. economy.

From a global perspective, the dollar's strength, driven by inflationary pressures, is also in line with expectations of price stability. At this time, the us took the opportunity to adjust its weak dollar strategy, which could not only be a "good man" and restore the hegemony of the us dollar, but also facilitate the flow of global financial resources to the us. Treasuries are an important signal of a reversal.

With the dollar in mind, look back at one of the "big three myths" about inflationary pressures in China.

From the dominant point of view, this round of inflationary pressure is mainly imported and a monetary phenomenon, which is caused by the surge of oil and commodity prices caused by the depreciation of the us dollar. If we add the so-called "high growth and low inflation" of the previous two years, we are actually pushing back the pressure on prices. And this, probably, has not been noticed enough.

From this observation, this round price rise, mainly depends on the dollar factor. Just a number of international institutions have a clear judgment on the strength of the dollar, oil and other production prices have also been relatively clear expectations. Under such circumstances, how to view China's price trend and peripheral economic environment, adjust the corresponding economic policy, is a problem that can not be ignored.

Look at the liquidity problem in the second of the three myths, which also relates to dollar trends. In recent months, as the trade surplus has been shrinking, a flood of foreign exchange for unspecified purposes has created new hedging pressures. Why is hot money piling into China? It is to seek arbitrage from two aspects in a short time. One is the appreciation of the RMB; the other is the expectation of the widening of the sino-us interest rate gap.

...

...

Download as:   txt (7.3 Kb)   pdf (38.3 Kb)   docx (9.7 Kb)  
Continue for 4 more pages »
Only available on AllBestEssays.com
Citation Generator

(2019, 08). The Three Myths in the Chinese Economy. AllBestEssays.com. Retrieved 08, 2019, from https://www.allbestessays.com/essay/The-Three-Myths-in-the-Chinese-Economy/72451.html

"The Three Myths in the Chinese Economy" AllBestEssays.com. 08 2019. 2019. 08 2019 <https://www.allbestessays.com/essay/The-Three-Myths-in-the-Chinese-Economy/72451.html>.

"The Three Myths in the Chinese Economy." AllBestEssays.com. AllBestEssays.com, 08 2019. Web. 08 2019. <https://www.allbestessays.com/essay/The-Three-Myths-in-the-Chinese-Economy/72451.html>.

"The Three Myths in the Chinese Economy." AllBestEssays.com. 08, 2019. Accessed 08, 2019. https://www.allbestessays.com/essay/The-Three-Myths-in-the-Chinese-Economy/72451.html.